Bank of England to take on banks' loans to help mortgage market

The Treasury is set to give the go-ahead for a Government-backed plan to help mortgage companies start lending again in the wake of the credit crunch.

Alistair Darling, the Chancellor and the Bank of England have provisionally agreed to the Bank taking over mortgage loans sitting on lenders' balance sheets in order to increase the liquidity in the money markets.

The Bank would grant Government bonds in exchange for securities backed by UK mortgages.

Daily Telegraph

Just heard about this on the BBC news. About time the Bank of England did something radical. Hopefully this plan will kick start the markets

It has potential, but I'd like to know what measures the Bank of England have put into place to keep taxpayers' money safe from the market turmoil.

Let's hope it does some good.

Originally posted by Ste2652
It has potential, but I'd like to know what measures the Bank of England have put into place to keep taxpayers' money safe from the market turmoil.

Let's hope it does some good.

Yeah, totally agree

One security feature is rumoured to be the BoE will return loans if the Banks misbehaviour i.e ending the arrangement.

From what I've read it's a proposal that has a lot of merit
(in a climate where the banks have become adamant that they are going to act like frightened OTT children despite them having been responsible almost entirely and brought the current difficulties upon themselves).

The root of the problem seems to me to be an over-reliance on money to make money.
I'm not disputing that it can but the lengths some of these guys have gone to too and the risks they have taken to try and extract profit beggars belief.......of course higher risk usually demands higher rewards but surely at some point the level of exposure (to that risk) eventually crosses some-one's mind!?

One can only wonder what happened to the days of banking management understanding what they own staff are doing (which is a significant part of this problem).

For anyone who wants to understand what has been going on (and that we are far from 'out of the woods' yet) I can recommend this (very watchable) financial documentary -
Dispatches: How the Banks Bet your Money (Ch.4) first shown on 18th Feb 2008.

It can be (legally & safely) downloaded from 'The Pirate Bay' on bittorrent here - link to Dispatches torrent

It'll make your teeth curl.

Personally I think a lot of this ends when we finally return to some sanity about our housing policies.
For as long as too many people are determined to view their house as a vehicle for quickly generating money and not a home to live in long term then those people are doomed to repeat the cycle of housing booms & busts.

It's a damned shame for those caught in the crossfire but it has to be said that (following the experience of the last housing bust in the early 1990s) the current troubles are nothing like as bad.
Yet.

It's also true that this time around the current UK housing slowdown (IMO we are far from any general credible actual 'bust' in the market as a whole as yet) has come entirely from the activities of the private financial 'industry' and the activities of private borrowers and not as a direct result of Gov interest rate policy.